Latest wheat price rise could impact flour costs

16 July, 2010
Page 4 

Despite the Met Office announcing the sunniest June since 1929, the rise in wheat prices in the past few weeks could mean a significant increase in flour costs.

Wheat prices surged again by £8 today - the equivalent of £11 per tonne of flour - having risen sharply since 29 June.

Gary Sharkey, head of wheat procurement at Rank Hovis, told British Baker: "We are in a global market and wider forces hold the key to UK wheat and, therefore, flour prices. One reason for the recent surge in wheat prices is that excessive rains and flooding in the high-quality wheat-growing regions of Canada are forecast to reduce their production by 4 million tonnes from previous estimates."

He said that while the United States Department of Agriculture (USDA) only reduced their forecast for EU production by 1 million tonnes, most traders and government bodies said the recent high temperatures would have affected yields adversely by 10-15%.

Sharkey said: " Looking further afield, Russian production is now estimated to be 8 million tonnes below last year, which will impact global trade, as Russia has become the source of supplies for many north African destinations in the past few years."

Closer to home, based on forward UK breadmaking prices for the harvest 2010, flour costs could be 15-20% higher year-on-year, Sharkey stated. He added that the USDA's annual corn-seeding forecast, released on 30 June, stated that US farmers have planted 1.5 million acres less corn than anticipated by international trading companies. "This impacts on wheat values, because corn is the underlying commodity in world feed grain trade and many processors have the ability to switch into wheat," said Sharkey. "If corn prices rise, so do wheat prices."

Alex Waugh, director general of the National Association of British and Irish Millers, said: "Perversely, the wonderful weather we have been enjoying in Britain may help bring about an increase in wheat prices as yield is expected to be lower due to the dry weather. Quality may be good, but that all depends on weather during the harvest period."





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